August 20, 2005

'Poorly built house' case ends after lengthy fight

Both sides are claiming victory in a bitterly contested case
involving defects in a new luxury home in Ottawa's Central Park
subdivision, which was purchased for $443,500 in August 2000.

For the next four years, the parties were engaged in what a judge later
called "an intense and drawn-out saga" over problems with the house at
69 Whitestone Dr.

The purchasers were Karen Somerville and Alan Greenberg, a married
couple who bought the luxury house from Ashcroft Homes.

After they moved in, Greenberg and Somerville compiled a list of 130
problems with the house, ranging from dirty windows to undersized
ducting and furnace capacity. A lengthy fight developed, and ultimately
the buyers commenced litigation in 2001 against virtually everyone
involved in the home construction and purchase, including the Ontario
New Home Warranty Program (now Tarion).

After several conciliation attempts, ONHWP finally determined that the
duct work was defective and ought to have been warranted.

Starting in December 2002, Somerville began to experience poor health,
and was eventually diagnosed by her doctor with sick building syndrome
due to a hypersensitivity to mould.

By October 2003, the couple had vacated the house and abandoned the
contents on the doctor's recommendation. They never returned. As the
trial judge later said, "In hindsight, the combination of a problematic
house, a mass production builder, and the expectations of these
plaintiffs rendered the possibility of the repair of the home an
impossibility."

Last summer, Ashcroft purchased the home back for its then-market value
of $550,000.

In February and March of this year, the case proceeded to a month-long
trial on the issue of compensation for other damages suffered by
Somerville for sick building syndrome, out-of-pocket expenses,
appliances and fixtures left in the house, mental stress, expert fees,
legal fees, and money spent on repairs. The total amount claimed
exceeded $1.5 million.

In early August, Justice Robert L. Maranger released his decision,
awarding the plaintiff buyers $15,000 in general damages for stress and
emotional upset, and a further $6,675 for testing and repairs, for a
total award of $21,675. He turned down the claim for $1 million in
punitive damages.

"On the fundamental question of whether the defendant builder breached
its contract with the plaintiffs," Justice Maranger wrote, "the evidence
in this case supports a finding of a breach of contract. The
reconciliation reports from ONHWP, the outstanding work orders from the
City of Ottawa, the building code violations, the evidence of engineers
who prepared reports on behalf of the builder, all support the
proposition that this was a poorly built house. The Agreement of
Purchase and Sale provides that the `Real Property will be constructed
in a good and workmanlike manner.' This house, in my view, was not."

Both sides of the case issued statements after the 32-page decision was
released on August 5. David Choo, president of Ashcroft Homes, welcomed
the decision of Justice Maranger. He was "satisfied" that the court's
decision "effectively addresses the key issues in this unfortunate court
case."

"From the outset of this long and difficult situation we have made every
effort to address each of Ms. Somerville and Mr. Greenberg's concerns up
to and including repurchasing of their home from them."

He added that his company took the judge's comments seriously and would
strive to improve customer service.

Somerville and Greenberg issued a statement noting that they were
pleased that Justice Maranger agreed with their experts in relation to
the poorly built home resulting in a breach of contract, but "we are
obviously disappointed that (he) did not accept our experts' opinions
that this poorly built home caused Karen Somerville's illnesses, e.g.,
asthma and sick building syndrome, and that we should vacate that home
for health reasons."

The judge will decide later whether or not to award costs to one party
or the other, and the amount of any award.

In this case, the trial lasted four weeks and involved the testimony of
numerous experts and thousands of pages of documents. Generally, a court
case and trial of this length can cost each side several hundred
thousand dollars in fees before a final decision is reached. I would not
be surprised if the combined legal costs exceed the market value of the
house.

Judges usually order the losing party to pay part of the winner's legal
fees. Here, one thing is certain: There will be no winners in this case,
no matter which side is ordered to pay costs.

It's an unfortunate truth that litigation is only for those who have
deep pockets or are willing to lose a substantial chunk of their assets
in the process of making their point in court.
***

[1]
On the 17th day of August, 2000, the
plaintiffs bought a home from the defendant builder. The parties
for the next 4 years bitterly argued over the rectification of
problems with the house. The defendant builder finally bought
back the residence from the plaintiffs for its market value on
August 11, 2004. This trial dealt with whether the plaintiffs
were entitled to any other form of compensation by way of
damages, as a result of the purchase of this house and its
aftermath.

Background and Factual Analysis

[2]
The plaintiffs Karen Somerville and Alan Greenberg
are husband and wife. On December 11, 1999, they entered into an
Agreement of Purchase and Sale with the defendant, Ashcroft
Homes. The agreement was for the purchase of a residential
dwelling, known as the Cardin Model Home, to be built in a
subdivision known as Central Park in the City of Ottawa, the
address of the home was to be 69 Whitestone Drive. The total
purchase price including a lot premium and other extras was
$443,442.97.

[3]
The Agreement provided for a closing date of July 3,
2000. This was extended to August 17, 2000, with the consent of
the plaintiffs.

[4]
On August 17, 2000, the transaction closed. The
plaintiffs attended 69 Whitestone Drive for an inspection of the
home. They legitimately expected to be moving into their fully
completed brand new home; instead they found a number of trades
people inside the house still performing work. Thus began an
intense and drawn out saga between these homeowners and this
builder in relationship to the construction of this house.

[5]
The plaintiffs were told that the work remaining
was fundamentally cosmetic and that within a two-week timeframe
the home would be completed to their satisfaction.

[6]
The plaintiffs did not accept this analysis and
based upon their own assessment engaged Bottriell Engineers to
conduct a detailed inspection of the home. This was carried out
on August 28, 2000. This firm of engineers specializes in home
inspections.

[7]
Bottriell s report was a detailed critique of the
workmanship in relationship to this house, it enumerated 130
problems, some very minor such as dirty windows , some more
serious such as undersized duct work, or too small of a furnace.
This report was in large part derived from the plaintiffs own
inspection and perception of the deficiencies with the home. The
covering letter from Bottriell to the homeowners states, Our
attached deficiency list was derived from the list you provided
us. Your list was reviewed and these deficiencies were verified
and included as part of the report .

[8]
The report precipitated a meeting with the
plaintiffs and the defendant builder. The first meeting was on
September 1, 2000 with Mr. John Stokes the construction manager
for the builder. It appeared that the parties were going to work
out their difficulties, Ms. Somerville at the outset disclosed
how she intended on dealing with the matter and with the
defendants. In her correspondence, dated September 8, 2000, she
stipulated the following Given that there are in excess of 130
line items that are going to be addressed, I will be treating
this as a project and preparing a weekly status report based on
the list that we provided to you on August 31, plus any new
problems that surface. I will provide you with a copy of the
progress of this project each Friday .

[9]
The issue of work deficiencies and problems, as they
relate to 69 Whitestone Drive, were in my view, really only a
question of degree. The evidence at trial clearly supports the
general proposition that this house had a significant amount of
problems. However, what transpired in the ensuing 4 years is
difficult to comprehend. The plaintiffs, particularly Ms.
Somerville, embarked upon a campaign of prodigious letter
writing, involving numerous third party entities, which included
the Ontario New Home Warranty Program (ONHWP), the City of
Ottawa, politicians from all levels and to a certain extent the
media. The plaintiffs hired a great number of experts to assist
in attempting to prove the deficiencies or other claims. The
plaintiffs frustration over the home was palpable and at times
understandable. Ms. Somerville authored several hundred letters
and e-mails as a result of either her dissatisfaction with the
home, the builder, or a given third party involved in the
dispute. This culminated in a law suit commenced on August 16,
2001, that originally had as named defendants virtually any
individual or entity associated with this home and the dispute
respecting its deficiencies and repairs.

[10]
The only defendants remaining at the commencement of
trial were the builder, and Mr. Paul Kelly the solicitor who
represented the plaintiffs on the real estate transaction
respecting 69 Whitestone Drive. The Court was advised at the
outset that the issue of Mr. Kelly s potential responsibility
was not to be dealt with during this trial and that this was to
be strictly considered as a case between the plaintiffs and the
builder.

[11]
This trial lasted 4 weeks and involved the testimony of
numerous experts and thousands of pages of documents. Counsel
for the plaintiffs very thoroughly, and skilfully presented an
overview of the day-to-day lives of the plaintiffs from the day
they moved into this house up to the date of this trial. The
amount of detailed information provided to advance the different
claims in this case, made the determination of the essential a
daunting task. In terms of extricating the most important facts,
a review of the reasons why it became impossible to repair 69
Whitestone Drive was the chosen approach and in this regard the
following evidence and findings were in my view the most
important:

When the initial report from Bottriell was completed on
August 30, 2000, the parties at first showed some goodwill and
the desire to rectify the situation. The builder replaced an
undersized furnace and acknowledged the error. The builder
provided an air conditioner to the plaintiffs at no charge to
attempt to make amends for their inconvenience. What became
reasonably clear early on is that the parties could not agree on
what in fact had to be repaired or when the repairs could be
performed.

As with most new homes, 69 Whitestone Drive was subject
to the Ontario New Home Warranty Program (ONHWP) which was a
mechanism for resolving disputes between homeowners and builders
concerning work deficiencies with new homes. The parties tried
for almost 8 months to settle their differences without the
programs intervention, but the number of complaints, the
difficulty caused by both parties in scheduling repairs, and a
breakdown in communication made this impossible.

On March 2, 2001, a representative of ONHWP, Mr. Paul
Rochon, found 39 warranted items under the program and 42 items
that were not warranted. One of the key items that was not
warranted in that report was the Heating Ventilation Air
Conditioning system (HVAC) and more particularly, the size of
the duct work located throughout the home and the need for it to
be replaced with larger duct work. After the plaintiffs engaged
their own expert on the issue of the duct work and numerous
letters were exchanged, the ONHWP finally commissioned their own
report concerning the HVAC and on August 12, 2001, several
reconciliation reports later ONHWP determined that the duct work
in question ought to have been warranted.

This issue of the duct work acted as a barrier to
performing other repairs, such as repairs to drywall, painting
and miscellaneous other work. Ms. Somerville felt that these had
to wait until such time as the duct work problem was addressed,
simply because the replacement of the duct work would
necessarily involve damaging paint and drywall located
throughout the home.

The problems in relationship to this house surfaced at
various intervals between the original purchase and repurchase
by the defendants. The plaintiffs from time to time would make
legitimately increased demands to the defendants to undertake
certain repairs. The requests to have things done to the house
became an ever-expanding matter. Leaks in the roof, ice build up
on the roof, water in the basement, the smell of sewage in the
home, mould growth in the bathroom, the lack of damp proofing
around the house, were not necessarily in the Bottriel report,
but surfaced with the passage of time. The notion that this
house could be repaired quickly had for all intents and purposes
become a logistical impossibility.

The potential to repair the home to the satisfaction of
the plaintiffs was further marred by the issue of what access
was allowed or provided for the various trades people
responsible to complete the repairs to the home. The scope of
the work that would have had to be performed to put this house
in a condition that would have satisfied the plaintiffs would
have required, in my view, a substantial block of time. The
plaintiffs would have had to move out of the house for one month
or two months. Furthermore, allowing trades people to come in
for large blocks of time while the plaintiffs continued to
reside in the home was particularly problematic in this case,
because Ms. Somerville was a self-employed business consultant
who required the use of her home to conduct her business
affairs.

On April 2, 2001, the possibility of having the home
repaired to the parties mutual satisfaction was hampered when a
lawyer representing Ashcroft Homes delivered correspondence to
the homeowners. The letter was an ultimatum with respect to the
scheduling of trades people. The position taken was that the
completion of remedial work to the home was to be in accordance
with the first reconciliation report from ONHWP and nothing
more.

On August 16, 2001, the plaintiffs issued a Statement of
Claim against the builder, a number of the trades people
involved in the construction of the house, ONHWP, the City of
Ottawa, and Mr. Paul Kelly. The claim being advanced was for
compensation above and beyond the rectification of their home.

The plaintiffs engaged the services of an engineering
firm, Buchan, Lawton, Parent LTD (BLP), who prepared a report,
dated October 25, 2002. This report listed some 86 building and
construction issues. Their report advised and considered that
out of the 86 deficiencies, 36 items constituted building code
violations. The report highlighted outstanding work orders with
the City of Ottawa. The same firm prepared and filed a report
indicating that the costs to complete the repairs listed would
have been between $260,000 to $334,000.

Karen Somerville became involved in the Central Park
Community Association, one of the mandates of this association
was to collectively deal with Ashcroft Homes regarding the
problems with the homes in the Central Park Development. Ms.
Somerville felt free to use the media and also created a
national website called Canadians for Better Built Homes. In
essence, Ms. Somerville became an activist, with respect to the
issue of home building and specifically targeted Ashcroft Homes.

In December of 2002, Ms. Somerville began to experience
poor health. In January 2003, she read information on mould and
Sick Building Syndrome (SBS). The plaintiffs noticed a build
up of some mould in their bathroom. Ms. Somerville was tested
for mould allergies in the spring of 2003, the results proved to
be negative. On June 6, 2003, an air quality investigation was
conducted by the Engineering firm BLP, they concluded that the
house was contaminated with mould. In September 2003, Ms.
Somerville was referred to Dr. Molot who diagnosed her with SBS
and found that she was hypersensitive to mould.

In October 2003, Mr. Greenberg and Ms. Somerville
vacated the home on the advice that the home was now toxic. They
were informed that the air quality in the home was making Ms.
Somerville very ill. They were also told not to remove the
furniture from the home because mould spores located in the home
had somehow contaminated their personal belongings and
furnishings. The advice in question came from Dr. Molot and
BLP s representative, Ms. Carol Ann Hinde.

The plaintiffs never returned to the home. In hindsight,
the combination of a problematic house, a mass production
builder, and the expectations of these plaintiffs rendered the
possibility of the repair of the home an impossibility.

[12]
On the fundamental question of whether the defendant
builder breached its contract with the plaintiffs, the evidence
in this case supports a finding of a breach of contract. The
reconciliation reports from ONHWP, the outstanding work orders
from the City of Ottawa, the building code violations, the
evidence of engineers who prepared reports on behalf of the
builder all support the proposition that this was a poorly built
house. The Agreement of Purchase and Sale provides that the
Real Property will be constructed in a good and workmanlike
manner . This house in my view was not.

[13]
The trial went into a great deal of detail with respect
to the nature and degree of deficiencies. The importance of
arriving at a particular conclusion as to the magnitude of these
deficiencies is of limited use in this case, this is because the
builder bought back the house on August 16, 2004, for its then
market value of $550,000. The Court can infer that the builder
bought the house back as though it were without deficiencies.
This effectively eliminated the need to speculate as to the
depth of the repairs, and rendered moot the issue of whether
there was a need to spend $334,000 to fix the house as
postulated by the engineering firm BLP.

[14]
What this Court was called upon to adjudicate was
whether or not any other compensation in the form of damages
should be awarded to the plaintiffs by reason of the actions of
this builder and the breach of contract. The plaintiffs claim an
assortment of damages including: Non-pecuniary and pecuniary
damages for Karen Somerville for SBS, a subrogated claim in this
regard for OHIP, out-of-pocket expenses on account of moving out
of the home, loss of business income for Ms. Somerville, general
damages for both plaintiffs for mental stress, punitive damages,
special damages for the costs associated with experts and legal
fees, reimbursement for appliances and fixtures left at 69
Whitestone Dr., reimbursement for landscaping and improvements
done at the residence, and reimbursement for money spent on
repairs to the home. The total amount claimed exceeded
$1,500,000.

[15]
The determination of these various claims resulted in
the necessity to address the following specific matters that
arose during the course of the proceedings:

1) Do the warranty provisions contained in the Agreement
of Purchase and Sale operate so as to preclude the plaintiffs
from suing the builder for anything other than the repair of the
house or the costs they incurred to complete any repairs to the
house?

2)Did the plaintiff Karen Somerville establish that she
sustained Sick Building Syndrome because of the faulty
construction and design of 69 Whitestone Drive?

3)Are the plaintiffs entitled to reimbursement for the
various expenditures they incurred as a result of moving out of
the house in October of 2003?

4)Is the plaintiff Karen Somerville entitled to damages for
loss of business income?

5)Should the plaintiffs be awarded damages for
inconvenience, disruption and mental distress resulting from the
actions of the builder?

6)Are the plaintiffs entitled to punitive damages?

7)How should the issue of costs for experts, the reports of
experts, and legal fees both before and after the commencement
of this action be treated in this case?

8)What impact did the purchase of the home by the defendant
builder have on this matter, and should the plaintiffs be
entitled to be reimbursed for chattels left behind, improvements
made to the house or property, or money spent on repairs to the
home?

Warranty Issue

[16]
The parties in this case entered into a standard
Agreement of Purchase and Sale. Counsel for the defendant,
Ashcroft Homes, in an effort to summarily dispose of this law
suit argued that as a matter of law, the plaintiffs were not
entitled to damages for: illness, costs associated with moving
out, loss of business income, inconvenience and mental stress,
reimbursement of expenses incurred and the reimbursement of
costs incurred for experts and legal fees. The thrust of the
argument was that paragraph 6 of the Agreement of Purchase and
Sale incorporates s.13(1) and s.13(2)(b) of the Ontario New
Home Warranties Plan Act, which in essence defines the
defendants warranty obligations. The relevant sections of the
Act state the following:

Warranties

13. (1) Every
vendor of a home warrants to the owner,

(a) that the home,

(i) is constructed in a
workmanlike manner and is free from defects in material,

(ii) is fit for habitation, and

(iii) is constructed in
accordance with the Ontario Building Code;

(b) that the home is free of
major structural defects as defined by the regulations; and

(b) secondary damage caused
by defects, such as property damage and personal injury;

[17]
The argument put forward was that all other damages
being claimed apart from a relatively small sum expended to
repair the roof were secondary damages caused by defects, such
as property damage and personal injury , and that the Agreement
of Purchase and Sale, at paragraphs 6 and 24 act to effectively
eliminate any independent or concurrent responsibility in tort.
The clauses in the agreement provide in part:

6 CONSTRUCTION WARRANTY The
Vendor is enrolled under the provisions of the Ontario Home
Warranties Plan Act The Vendor warrants that, subject to the
exclusions prescribed by the Act and Regulations, the Real
Property will be constructed in a good and workmanlike manner
and that for a period of one year from the closing date or the
date of occupancy by the Purchaser, whichever is earlier, will
be free of defects fit for habitation Constructed in
accordance with the Ontario Building Code under which the
Building permit was issued, affecting health and safety Free
from major structural defects.

24ENTIRE AGREEMENT
This agreement constitutes a
binding contract of purchase and sale and expresses the entire
understanding and agreement between the parties hereto and there
is no representation, warranty, collateral agreement or promise
whatsoever affecting the Real Property other than as expressed
herein in writing. This Agreement shall not be amended, altered
or qualified except by a memorandum in writing signed by the
parties hereto.

[18]
The proposition put forward was that the warranty
provisions and the Agreement of Purchase and Sale had the
combined effect of precluding the plaintiffs from claiming
damages in negligence and acted as a bar to the various heads of
damages being pursued by the plaintiffs in this particular case.

[19]
In my view, the case law does not support this strict
interpretation of the relationship between someone buying a
house and a builder. The limits of one s ability to sue for
tortious remedies are not vacated by warranties having to do
with the construction and fitness for habitation of a particular
building.

[20]
In the Supreme Court of Canada decision of Winnipeg
Condominium Corporation No. 36 v. Bird Construction
Company Ltd.,
1995 CanLII 146 (S.C.C.), [1995] 1 S.C.R. 85, Mr. Justice La
Forest speaking for the court makes the following comments with
respect to the concurrent possibility of contractual and
tortious responsibility from the perspective of a builder. At
paragraphs 21 and 23 he states as follows:

In my view where a contractor
(or any other person) is negligent in planning or constructing a
building, and where the building is found to contain defects
resulting from that negligence which pose a real and substantial
danger to the occupants of the building, the reasonable cost of
repairing the defects and putting the building back into a
non-dangerous state are recoverable in tortby the
occupants. The underlying rational for this conclusion is that a
person who participates in the construction of a large and
permanent structure which, if negligently constructed, has the
capacity to cause serious damage to other persons and property
in the community, should be held to a reasonable standard of
care .

I observed that it is well
established in Canada that the duty of care in tortmay
arise coextensively with a contractual duty.

[21]
An Agreement of Purchase and Sale that contains
warranties with respect to the correct building of a home,
pursuant to the Ontario New Home Warranties Act, supra,
would govern claims with respect to work deficiencies and the
need for repairs, however, this does not necessarily preclude a
plaintiff from bringing an action in negligence for negligent
construction and all of the various heads of damages that can
flow from that negligence.

In my view, a contractor s duty to take reasonable care arises
independently of any duty in contract between the contractor and
the original property owner. The duty in contract with respect
to materials and workmanship flows from the terms of the
contract between the contractor and home owner. By contrast, the
duty and tort with respect to materials and workmanship flows
from the contractor s duty to ensure that the building meets a
reasonable and safe standard of construction. For my part, I
have little difficulty in accepting a distinction between these
two duties. The duty in tort extends only to reasonable
standards of safe construction and the bounds of that duty are
not defined by reference to the original contract.

[23]
The Agreement of Purchase and Sale and the warranties
contained therein, do not preclude a plaintiff from claiming for
such matters as illness caused by SBS, and all of the damages
that flow from such a claim.

[24]
The unusual nature of this case and some of the
claims being advanced by the plaintiffs are actions in tort, and
in my view can stand alone and independent of the Agreement of
Purchase and Sale and warranties contained therein. Therefore, I
would reject this argument as a means of summarily dispensing
with all of the plaintiffs claims.

Sick Building
Syndrome

[25]
The plaintiffs claim that as a result of the
deficiencies of design and construction of the house Ms.
Somerville became very ill. The alleged problems creating the
health difficulties included: water infiltration in the
basement, toxic exhaust gases entering the home, poor air
circulation because of undersized duct work and a lack of
venting in the master bathroom allowing for the development of
excessive mould. The suggestion was that these problems created
a cocktail effect that rendered the air in the home poisonous to
Karen Somerville. The claim is framed in both negligence, and as
damages flowing from a breach of contract.

[26]
It is trite law to say that the plaintiffs must prove
the elements of a claim in negligence. This onus was summarized
by Professor G.H.L. Fridman in The Law of Torts in Canada
at pages 403-404:

The plaintiff must establish that he was owed a duty of care by
the defendant: he must also discharge the burden of showing that
the defendant breached that duty by some act or omission that
constitutes negligence .. his obligation is to convince the
court on the balance of probabilities, that it was more
probable than not that his injury or damage was caused by
negligence on the part of the defendant He must produce evidence
that, unless contradicted, tends to show that the defendant was
negligent.

[27]
In relationship to damages resulting from a breach of
contract the onus would be on the party claiming the damages to
show they were caused by the defendants breach. In either tort
or contract, in the matter at hand, the plaintiffs would have to
prove on a balance of probabilities that the construction and
design of 69 Whitestone Drive caused Ms. Somerville s health
problems.

[28]
Karen Somerville and Alan Greenberg resided at 69
Whitestone Drive for approximately three years and two months.
In October 2003, they vacated the home and left all of their
belongings behind, largely on the advice of Dr. Molot and Ms.
Carol Ann Hinde, a representative from BLP. This advice was
predicated on the notion that the house, due to the existence of
mould, a poor ventilation system and off gassing from building
materials had air that was making Ms. Somerville very ill. They
also advised that all of the plaintiffs belongings were now
contaminated and unusable.

[29]
Karen Somerville testified that in December of 2002,
she began to develop a chronic cough, and that by the spring of
2003, she began to have a variety of symptoms of poor health,
including: sore throat, post nasal drip, nasal congestion,
episodic sneezing, lethargy, decreased concentration, aching in
the jaw and finally symptoms of asthma.

[30]
In and around this time frame, the plaintiffs noticed
that mould was beginning to grow in certain areas of their
ensuite bathroom. Ms. Somerville also acknowledged that she read
an article in the Globe & Mail Newspaper dated January 28, 2003,
on SBS; the article described the possible effect of mould on a
person s health. The plaintiff further indicated that she made
the correlation between her symptoms and the mould found in the
bathroom.

[31]
In April of 2003, Ms. Somerville was referred to Dr.
Zave Chad, an allergist and immunologist. In his report to Dr.
Salamon, Ms. Somerville s family physician, Dr. Chad indicates
that he saw her for Rhinitis and a cough. He also indicated that
he performed allergy tests including tests for mould allergies
and that the results were negative. He did advise Dr. Salamon
that Ms. Somerville was allergic to fresh cut grass and dogs.

[32]
The combination of Ms. Somerville s health problems,
acquired knowledge on SBS and the presence of some mould in
their bathroom caused her to request that the engineering firm
BLP conduct an indoor air quality assessment of 69 Whitestone
Drive. As a result of this request, Ms. Carol Ann Hinde, M.A.,
an employee of BLP conducted, according to her report dated July
2003, an indoor air quality investigation in the ensuite
bathroom of 69 Whitestone Drive on June 6, 2003 .

[33]
Ms. Hinde s qualifications were not those of a scientist
or an engineer. The evidence showed that she possessed a Masters
degree in Geography, had participated in some seminars on
indoor air quality and was involved in a variety of studies
and projects both as a researcher and manager regarding indoor
air quality. The issue of whether she could testify on the
subject as a qualified expert was seriously contested. The Court
allowed her to give evidence on the specific findings and
testing of 69 Whitestone Drive, with the corollary that the
qualifications would go to the weight of her evidence.

[34]
The Court has had the opportunity to review not only the
report but also to hear the testimony of Ms. Hinde in
relationship to this investigation. I find as a fact that the
investigation simply involved Ms. Hinde s visually inspecting
what can best be described as small to noticeable amounts of
mould in the shower stall and between the glass blocks of a
shower wall located in the ensuite bathroom. It further involved
her removing some of the samples of this mould and having the
samples analyzed by a laboratory Paracel Laboratories Ltd. The
laboratory then indicated the following findings:

Please find enclosed the final report for samples received June
6, 2003. While Paracel provides information on the molds
recovered, interpretation of the results is the
responsibility of the client. Those propagules identified
that are known to be toxigenic or pathogenic are as follows:
Rhoma species have been isolated from cellulosic substrates, and
is hydrophilic. Some species are toxigenic and allergenic. None
of the remaining propagules identified are known to be toxigenic
or pathogenic .

[35]
Ms. Hinde s report postulates the following:

the findings indicate high amounts of several mold species are
present along with high amounts of mold parts Specifically the
analysis identified the molds Cladosporium cladosporiodes, Phoma
species and Botrytis cinerea. Some species of the Phoma genus
are toxigenic and allergenic, however, the analysis was only
able to identify down to genus level. Cladosporium is commonly
found outdoors and is a cause of asthma and hay fever. It is
less common indoors unless there is a source of indoor
contamination. Houses with poor ventilation may have a heavy
concentration of Cladosporium.

The report then points to the lack of a fan in the ensuite
bathroom, the duct size problem, and the notion that a window
cannot be open year round to remove excess humidity. It further
highlights Ms. Somerville s specific concerns respecting her
health and the presence of mould in the home.

[36]
In cross examination, Ms. Hinde acknowledged that an
indoor air quality analysis was not performed as part of her
investigation and report of June 6, 2003.

[37]
The Engineering firm, BLP then suggested that Ms.
Somerville see Dr. John Molot. Dr. Molot is a family physician
with a specific interest in environmental medicine. He saw Ms.
Somerville several times in September 2003. He diagnosed her
with SBS, the report filed explains how he arrived at this
conclusion:

The environmental exposure history, using the CH20PD2 model[1],
was not significant except for her home environment, which is
where she also works. She had moved into the house, which was
newly constructed, in August 2000. According to the history,
there were problems with the construction, with a leaking roof
and foundation. In the summer of 2002, mould was found growing
in the ensuite shower stall. Several problems were identified
including ventilation problems, which could also contribute to
increased moisture (e.g. no exhaust fan in ensuite bathroom) and
subsequent mould growth. Moulds (cladosporium, phoma and
botrytis) were identified from swabs taken from the ensuite
bathroom.

Discussion: The following significant points can be made
from this initial assessment:

Ms. Somerville was well prior to moving to her new home
at 69 Whitestone

New homes will gas off significant volatile organic
compounds (VOC) from a variety of building materials[3],
especially if humid. Pollutant exposure in the indoor air will
increase with inadequate ventilation

Ms. Somerville s symptoms of itchy eyes, sore throat, and
upper and lower airway irritation, together with fatigue,
headache and decreased concentration are typical for SBS1213

The diagnosis was asthma and sick building syndrome with
probable sensitivity to moulds

[38]
Dr. Molot s evidence and his report were more of an
argument for SBS than a legitimate diagnosis. It was predicated
on a finding that Ms. Somerville s self-reporting was flawless
and that she had no history of these types of health problems.
The evidence showed that the clinical notes and records of Ms.
Somerville s family physician, Dr. Salamon, indicate some
pre-existing symptoms. The notation for February 1999, clearly
indicate Ms. Somerville having symptoms of a heavy chest, a
cough and bronchitis. This pre-existing history was not dealt
with to any satisfactory degree in Dr. Molot s findings. The
diagnosis is also inextricably intertwined with the conclusions
of BLP that the home was riddled with air quality problems and
was virtually contaminated. He does not discuss or analyze in
any meaningful way other possible causes for Ms. Somerville s
difficulties such as allergies unrelated to the home.

[39]
In this respect, it is important to note, that prior to
Ms. Somerville and Mr. Greenberg leaving 69 Whitestone Drive, an
indoor air quality analysis was never performed. BLP s report
and investigation of June 6, 2003, consisted of the examination
of some mould in the bathroom and the suggestion that the duct
size, off gassing and general problems respecting improper
ventilation caused the air in this home to be of such poor
quality that it made Ms. Somerville sick. With respect to the
mould in the bathroom, photographs filed as exhibits show that
the amount of mould in question was not significant. It is also
important to note that actual air quality testing performed by
BLP on November 17, 2003, indicated that there was far more
mould at the exterior of 69 Whitestone Drive than in the
interior, especially the Cladosporium species Ms. Hinde
identified as the problem for Ms. Somerville.

[40]
In terms of the air quality in the home, the defendants
filed an expert report from Building Science Investigations,
Inc. and called evidence from Mr. Jonathan Solomon. He testified
that on March 18, 2004, they conducted an indoor air quality and
microbiological forensic investigation of the subject property.
This investigation included a general air assessment which
measured the level of carbon monoxide, carbon dioxide, relative
humidity, and general volatile organic compounds. The general
air quality assessment showed that the air in this house at the
point in time of the measurement was normal. With respect to the
issue of mould growth in the house, their conclusions were clear
in that they simply stated that there are no readily
identifiable indoor air quality related problems or material
mould growth associated with this residence . The testing in
this case was a comprehensive analysis which involved visual
inspection, the collection of culturable and non-culturable air
samples, throughout the house as well as outside.

[41]
Mr. Jonathan Solomon was qualified as an expert in
relationship to building sciences and mould. His qualifications
were impressive, they included: Bachelors of Science Degree in
Environmental Engineering and a Building Science Certification
from the University of Toronto. He indicated that he was the
only Engineer and Building Scientist in North America currently
participating in the American Industrial Hygiene Association
Environmental Microbiology Proficiency Analytical Testing
Program. He further testified that he had attained a
specialization as a structural mycologist (analyzing fungi
within the building envelope). Finally, Mr. Solomon testified to
having performed approximately 2100 microbiological
investigations, and to having been qualified as an expert by
other tribunals on a number of occasions.

[42]
The timing of the tests was an issue raised at trial,
due to the fact that there was no one living in the house since
October 2003, and that the mould had been cleaned up. It was
suggested that this had the impact of substantially weakening
the evidentiary value of the air quality tests performed after
that date. The logic of this argument is certainly valid.
However, Mr. Solomon testified that if there ever was a serious
mould problem or air quality problem in the house, some residual
manifestation of the problem would have surfaced at the time of
their investigation. This evidence was compelling. I accept this
opinion as valid. This conclusion was undefeated by any of the
other evidence heard on the subject during this case.

[43]
Finally, BLP on behalf of the plaintiffs engaged ECOH
Management Inc. to conduct an investigation and prepare a report
on mould and air quality in the home, they conducted their tests
in July of 2004. The Court can only infer that this was in part
to refute the findings of Building Sciences Investigation Inc.
This firm also conducted a comprehensive analysis and
investigation of the air quality in the home. The report
indicated the following:

The assessment involved a complete visual examination of the
house, a brief visit to the neighbours house, collection of air
samples, collection of tape lift samples of settled dust and
collection of vacuum dust samples from porous materials Based on
the visual examination, sampling results and other measurements
it is concluded that: 1. A mould amplification site is unlikely
on the main floor, upper floor and the basement. 2. Furniture
and other household furnishings do not have any signs of mould
growth or water damage. 3. Accumulated dust on the furniture and
other articles is indicative of normal fungal ecology of the
area. 4. Mould types and concentration in the general air at 69
Whitestone Drive is similar to that in the neighbour s house at
67 Whitestone Drive.

The crux of this report is that the amount of mould in this
house was for all intents and purposes within normal ranges.

[44]
I find as a fact that no real air quality testing was
conducted in the summer of 2003. BLP gathered some evidence of
mould samples and had them tested; they did not do anything
else. They did not conduct an air quality investigation
respecting mould or general air quality in the manner that
Building Science Investigations Inc., or ECOH Management Inc.
did in the spring and summer of 2004.

[45]
In relationship to the proposition that off gassing from
materials, moisture problems, poor air ventilation because of
the duct work and improper vent placement created poor air
quality in this home, I find that these may show poor quality of
construction however, standing alone they do not prove poor air
quality. These deficiencies were still in existence after
October 2003, when the investigations by Jonathan Solomon, and
ECOH Management were performed. There simply was no independent
evidence to support a finding that the air in that house was
bad. In truth, the only general air quality analysis ever
performed demonstrated the contrary.

[46]
Dr. Molot s report and conclusions were based upon Ms.
Somerville s subjective complaints, and the analysis of BLP.
His report quotes at length findings made by BLP concerning
ventilation problems, air quality problems, and the existence
of mould in the home . This erroneous information and the
subjective complaints of Ms. Somerville led Dr. Molot to
conclude that there could be but one cause for Ms. Somerville s
illnesses, and this is the poor air quality at 69 Whitestone
Drive. The problem with this conclusion is that there was no
independent evidence to demonstrate on a preponderance of
probabilities that there was anything particularly wrong with
the indoor air quality at 69 Whitestone Drive. Frankly, the best
evidence comes from the various indoor air quality
investigations conducted in November and later in the spring and
summer of 2004, all of these demonstrated scientifically that
there was nothing wrong with the indoor air quality at 69
Whitestone Drive.

[47]
I also find that Dr. Molot s report does not to any
significant degree, exclude any other possible causes of Ms.
Somerville s ill health. It is entirely possible that Ms.
Somerville was suffering from ill health in the winter of 2002
and spring of 2003, and that she began to feel better when she
left 69 Whitestone Drive. However, the required nexus between
her ill health and the poor construction or design of this
house, simply has not been made in this case.

[48]
In an article entitled Sick Building Syndrome
Diagnosis in Search of a Disease, Dr. Ronald Gots, M.D.,
Ph.D. generally hypothecates that SBS is so vague and so general
a diagnosis that to try to ascribe blame to a building for
certain illnesses can be problematic. He indicates:

The symptoms that bring indoor air to the attention of building
managers are generally common and non-specific: fatigue,
headaches, and eye and nose irritation. Because almost anything
can cause these symptoms, they are not tip-offs of SBS. And
patients belief that a particular building is the culprit can
impede medical investigation.

[49]
The plaintiffs have the obligation of demonstrating on a
preponderance of probabilities that Karen Somerville s health
problems were caused by the improper construction of 69
Whitestone Drive. This onus has not been met on the facts of
this case. The evidence demonstrating that there was nothing
wrong with the indoor air quality at 69 Whitestone Drive far
outweighs any evidence to the contrary.

[50]
Consequently, I find that the plaintiffs in this case
have not proven that the construction and design of 69
Whitestone Drive was the cause of Ms. Somerville s health
problems on a balance of probabilities. Therefore, the claims
for damages on account of Sick Building Syndrome are
dismissed, including all special damages for medical
expenditures related to this claim. The subrogated interest
claim from OHIP is also dismissed.

[51]
In relationship to non-pecuniary damages had the
plaintiffs been successful on liability, I would have assessed
these damages at $40,000 given the nature and scope of the pain
and suffering presented by Ms. Somerville in this case.

Abandonment of 69 Whitestone by Plaintiffs in October of
2003

[52]
The plaintiffs abandoned the subject property during
the month of October 2003, and left behind most of their
furniture and personal effects. The decision to vacate the
premises was as a result of advice received from Dr. Molot and
BLP, the engineering firm who came to the conclusion that the
subject home and contents were contaminated.

[53]
Karen Somerville and Alan Greenberg now claim as damages
for breach of contract and negligence the following
out-of-pocket expenses:

rent and related living expenses - $26,412

moving expenses - $15,014.62

other expenditures due to vacating home -$7,360.70

[54]
The nature of the expenses claimed range from the basic
rental costs of accommodation, to attempted clean up of the
furnishings and the reacquisition of items left behind but
needed for the apartment. Some items claimed such as a $701
catering bill, $576 for a fully decorated Christmas tree, or
meals in restaurants, were frankly very difficult to rationalize
as legitimate claims under virtually any case scenario.

[55]
The issue of responsibility for the out-of-pocket
expenses incurred on account of vacating the premises in October
of 2003, comes down to the following question: Was the defendant
builder responsible in negligence or in contract for the
plaintiffs decision to vacate the premises and incur the
various out of pocket expenses they now claim?

[56]
This question has already been determined by my
findings on the issue of Sick Building Syndrome . The
plaintiffs have not established on a balance of probabilities
that Ms. Somerville s health problems were as a result of the
construction or design of 69 Whitestone Drive, or that her
illness was due to SBS. The plaintiffs have not established on
a balance of probabilities that the subject property or its
contents were contaminated and therefore uninhabitable and
unusable.

[57]
The decision to leave the home and virtually all of
their possessions was based upon the advice of Dr. Molot and Ms.
Carol Ann Hinde. The builder did not suggest, encourage or take
any action to compel the plaintiffs to abandon the subject
property. The financial consequences of the decision to leave
the home are not a problem that can be visited upon the
defendant builder, on the facts of this case.

[58]
In relationship to the advice to leave all of their
personal belongings behind and incur expenditures related to
this decision, I have little hesitation in finding as a fact
that it became undeniable that this entire course of action was
simply unnecessary. The investigation and report commissioned by
the plaintiffs, and prepared by ECOH Management Ltd., left
little room for doubt in this regard. The report concluded that
Furniture and other household furnishings do not have any signs
of mould growth or water damage. Accumulated dust on the
furniture and other articles is indicative of normal fungal
ecology of the area. In the face of this evidence the
continuation of claims for expenses related to furnishings and
personal effects left behind as against Ashcroft Homes is
difficult to justify.

[59]
The Court heard evidence and reviewed photographs
concerning the plaintiffs returning to the home on November 27,2003. The plaintiffs were apparently advised of the need
to wear the type of protective clothing worn by persons handling
extremely hazardous or poisonous material. The Court heard
evidence that even with this apparel, Ms. Somerville became ill
with a cough, a heavy chest and a severe headache within an
hour of entering the home on November 27, 2003. Ms. Hinde opined
that the N-95 mask with its charcoal filter was not providing
adequate protection for Ms. Somerville. I find all of this
evidence in many ways troubling, especially in light of the
evidence later showing that the house was not contaminated. The
notion that Mr. Greenberg also had to wear this protective gear
when he never manifested any illness from the air in the house,
seemed to be nothing but an attempt to exaggerate the notion
that the house was somehow contaminated. It did very little to
add to the credibility of any of these claims.

[60]
The claims arising from the abandonment of 69 Whitestone
Drive have not been established. The plaintiffs have not proven
that they needed to leave the home and its contents because of
the negligence of the defendant.

[61]
The Court has made a finding that the defendants did
breach the contract by failing to provide the home that the
plaintiffs bargained for in the Agreement of Purchase and Sale.
Are the out-of-pocket expenses claimed for leaving the home
damages that reasonably flow from that breach? They are not. The
home had defects but it was not contaminated or uninhabitable.
The best evidence heard at this trial supports the opposite
conclusion. The plaintiffs did not have to leave the house in
October 2003, and incur the various expenses they now claim.
They may believe they did, but this belief, however fervent is
not the financial responsibility of Ashcroft Homes in this case.
Therefore, all claims for out of pocket expenses incurred as a
result of leaving the home and contents are dismissed. This
includes claims for the attempted clean up of the mould and/or
the furnishings purportedly contaminated by the mould.

Wage Loss Claim of Karen
Somerville

[62]
The plaintiff, Karen Somerville, in the Amended
Statement of Claim, claimed for loss of business income against
the defendant builder in the amount of $245,000. Ms. Somerville
testified at trial that the loss had conservatively reached
$300,000.

[63]
Ms. Somerville testified that she ran her own
consulting practice, the business was operated as a corporate
entity. The fundamental purpose was to provide both businesses
and government agencies advice and consultation with respect to
strategic planning and management. Ms. Somerville was also a
Ph.D. candidate in Business Management at Carleton University.
She further indicated that prior to engaging in the Ph.D.
program, and moving into 69 Whitestone Drive, her corporation
generated business income in excess of $170,000 per year. Ms.
Somerville further indicated that her income was reduced
significantly by reason of the purchase of 69 Whitestone Drive.
Ms. Somerville claimed that this was primarily due to the amount
of time she had to spend in dealing with all of the problems
with the house. The health difficulties Ms. Somerville suffered
were also described as a contributing factor to her income loss
in the years 2002/2003.

[64]
The claim was put forward under three possibilities:
Firstly, Ms. Somerville s chronic health problems caused by the
poor construction of the house prevented her from working to her
full potential. Secondly, because the house was defectively
built she could not use it as a home office. Finally, the
argument most relied upon was that due to the amount of time and
energy devoted to dealing with the problems associated with the
residence, Ms. Somerville was precluded from performing her work
as a consultant.

[65]
The proposition that the construction of the home caused
health problems and hampered her ability to produce business
income does not require a great deal of analysis. The previous
examination of this issue specifically eliminates attributing
responsibility for health difficulties and any corresponding
income loss incurred by Ms. Somerville to the defendant builder.

[66]
The second and third possibilities in terms of
attaching liability to the defendant builder for an alleged loss
of income, fall under the rubric of damages caused by the
defendants breach of contract. The central question thus
becomes did Ms. Somerville sustain a loss that could have been
reasonably contemplated by the parties at the time the contract
was entered? The analysis requires that the following issues be
addressed: Are the damages claimed too remote? Has the loss
claimed been proven? Has the plaintiff, Ms. Somerville,
mitigated her loss?

[67]
The question of remoteness of damages involves the
application of the old rule first stated by the courts in
England in Hadley v. Baxendale (1854), 9 Ex. 341,156
E.R.145. The rule states that parties to a contract will only be
held liable for losses suffered that could have been reasonably
contemplated at the time the contract was entered into. The rule
consists of two parts: imputed knowledge and actual knowledge of
special circumstances. In Hadley, supra, at 354-355 the
court described the rule in part as follows:

Where two parties have made a contract which one of them has
broken, the damages which the other party ought to receive in
respect of such breach of contract should be such as may fairly
and reasonably be considered arising naturally, or such as may
reasonably be supposed to have been in the contemplation of both
parties, at the time they made the contract, as a probable
result of the breach of it. Now, if the special circumstances
under which the contract was actually made were communicated by
the plaintiffs to the defendants, and thus known to both
parties, the damages resulting from the breach of such contract,
which they would reasonably contemplate, would be the amount of
injury which would ordinarily follow from a breach of contract
under those special circumstances, so known and communicated.

[68]
On the facts of this case, I have little difficulty in
finding that the business income loss claimed is too remote a
loss when applying the first part of the test in Hadley v.
Baxendale, supra. I find that a reasonable person would not
have contemplated that a party would lose business income of
$300,000 in the ordinary course of events, due to a breach of
contract in relationship to the proper construction of a house.

[69]
The second part of the test requires an examination of
whether the defendant builder was in possession of any actual
knowledge of special circumstances at the time the contract was
entered into. In this case, Ms. Somerville testified that at the
time the Agreement of Purchase and Sale was entered into, it was
made known to the builder that she would be using the home as an
office for her consulting business. I accept this as being the
case. The difficulty here, however, is that the evidence did not
support a finding that the residence could not be used as an
office, or that the deficiencies made the home unusable. The
evidence in fact demonstrated that the premises were used from
time to time for Ms. Somerville s work.

[70]
The proposition most relied upon in this case was that
because the house was poorly built Ms. Somerville was required
to expend an extraordinary amount of her time and energy towards
rectifying the problems, which precluded her from earning
business income through her consulting practise. The principle
difficulty with awarding damages for loss of income using this
argument involved Ms. Somerville s numerous other uses of time
that would have also impacted on her ability to work. The
evidence led at this trial make it virtually impossible to
determine what amount of time Ms. Somerville lost on account of
problems with the house and having to deal with the defendant
builder, as juxtaposed to her involvement in the obtaining of
her Ph.D., her involvement in the Central Park Community
Association, her acting as an advocate for another homeowner,
her dealings with the media, or the depth of her involvement in
this litigation. The time Ms. Somerville devoted to these
matters have little or nothing to do with the actual breach of
contract.

[71]
This problem is a blend of causation and a response to
the second question posed, has Ms. Somerville proven her
damages? In Ms. Somerville s evidence in cross-examination when
asked whether or not she kept a detailed record of the actual
time lost on account of dealing with the deficiencies as
compared to other matters, she indicated that she did not, but
that it would have been a good idea to keep such records.

[72]
The onus is on Ms. Somerville to prove damages on a
preponderance of probabilities, the claim for business income
loss has not been substantiated on the evidence adduced at the
trial of this matter. The damages claimed for loss of business
income are disconnected to the breach of contract. Ms.
Somerville could have worked at her consulting business, and
also dealt with the builder or lawyers in relationship to the
house. It was her decision to deal with this problem in the
manner that she did and to remove herself from her life as a
consultant. It is impossible on the evidence presented at this
trial to determine what if any income loss can be directly
attributable to her dealings with Ashcroft Homes in relationship
to the deficiencies in this house.

[73]
In this case, Ms. Somerville is claiming loss of
business income of $300,000 and had any of this amount been
proven to be the responsibility of the defendants there would
still be the question of mitigation of damages. The principle of
mitigation in cases of breach of contract was stated in Red
Deer College v. Micheals et al. (1975), 57 D.L.R. (3d) 386
(S.C.C.) per Justice Laskin:

The primary rule in breach of contract cases, that a wronged
plaintiff is entitled to be put in as good a position as he
would have been in if there had been proper performance by the
defendant is subject to the qualification that the defendant
cannot be called upon to pay for avoidable losses which would
result in an increase in the quantum damages payable to the
plaintiff. The reference in the case law to a duty to mitigate
should be understood in this sense

In short, a wronged plaintiff is entitled to recover damages for
the losses he has suffered but the extent of those losses may
depend on whether he has taken steps to avoid there unreasonable
accumulation.

[74]
The plaintiff, Ms. Somerville in this case did not take
any steps to avoid the perceived loss of business income. The
claim advanced here is for lost income over the course of
several years. Some fairly simple steps could have been taken
very early on in this case to significantly reduce any perceived
loss. These would include finding alternative office
headquarters, or devoting less time to matters unrelated to the
deficiencies in the home. The claim for a loss of business
income on the evidence heard at this trial is for all of the
aforementioned reasons dismissed.

Are the Plaintiffs Entitled to Damages on Account of Mental
Stress and Loss of Enjoyment of Life in this Case?

[75]
The acquisition of a new home, and moving into a new
home is in and of itself a stressful event. The number of
problems and deficiencies with 69 Whitestone Drive went well
beyond average, well beyond what can be considered acceptable.
The parties here can in many respects point to each other when
it comes to the issue of access to the home to effect repairs.
The Court heard a great deal of evidence as to the attempts to
schedule trades people to perform repairs. The failure and
inability to do so has already been documented and analyzed. In
my view, in cases such as these, the responsibility to appease
and to take every step to rectify should fall squarely on the
shoulders of the builder. I believe it to be a fair comment that
the hallmark of a good home builder should be customer service
after the purchaser moves into their new home.

[76]
The case of McHardy v. Charlene Witt Realty Ltd.,
[1999] O.J. No. 265 (Gen.Div.) was in many respects
factually similar to this matter. McHardy, supra,
involved a plaintiff who had acquired a new home and who had
numerous difficulties with respect to its construction. In that
decision after analyzing the evidence and concluding that the
home had a great many problems for which the builder was
responsible, an award of $4,500 in damages was made for
compensation, for inconvenience, disappointment and the loss of
enjoyment of their greatest asset .

[77]
In the case of Smerigilio v. Great Gulf Homes Ltd.,
[1999] O.J. No. 85 (Gen. Div.) which involved a dispute between
new homeowners and a builder over the installation of granite
floors, the court in that case awarded the plaintiffs the sum
of $6,000 as compensation for the defects listed and for the
inconvenience of having to live with such defects. This sum
includes any tax involved and includes compensation for the
inconvenience that the plaintiffs will experience when the
remedial work is done. The case does not specifically segregate
damages for inconvenience but it was a consideration in the
amount awarded.

[78]
The plaintiffs in this case were in a different league
than in either McHardy or Smeriglio, supra. This
matter dragged on for years. The evidence presented in this case
gives me little difficulty in concluding that Ms. Somerville and
Mr. Greenberg in their dealings with the defendants and trying
to have repairs done to their house, suffered inconvenience,
disappointment, the loss of enjoyment of their home and stress.

[79]
The defendant builder in this case should have been
aware at all times of the outstanding work orders with the City
of Ottawa and the fact that an occupancy permit had yet to be
produced in relationship to this home. There were numerous
deficiencies that should have been acknowledged early on in the
negotiations such as the undersized duct work, the damp
proofing, or the lack of a fan in the bathroom. These should
have been rectified in a prompt and efficient manner. As in the
McHardy, supra, case the acceptance of responsibility was
not forthright and unequivocal.

[80]
In this case, the plaintiffs are entitled to some
compensation under this head of damage. In my view, the
plaintiffs are entitled to the higher end of this type of award
of damages. In the circumstances of this case, I award $15,000
in general damages for the stress, emotional upset and
difficulties they had to endure as a result of the poor
construction of this home.

Punitive Damages

[81]
The plaintiffs have also claimed punitive damages of
$1,000,000. The Supreme Court of Canada in the case of
Whitten v.Pilot Insurance Company [2002] 1 S.C.R.,
provided a framework respecting what would be required factually
prior to taking the extraordinary step of awarding punitive
damages. The decision provides an analysis of the purpose for
punitive damages as well as what factors should be considered in
deciding the amount of the award.

[82]
Although presented in the context of appropriate
instructions to a Jury, the principles are clearly applicable in
any civil case where a plaintiff seeks this remedy. The court in
that decisionat page 597 indicated the following:

An award of punitive damages in a contract case, though rare, is
obtainable. It requires an actionable wrong in addition to the
breach sued upon a contract

The trial judge s charge to the jury with respect to punitive
damage should include words to convey an understanding of the
following points: (1) punitive damages are very much the
exception rather than the rule, (2) imposed only if there has
been high-handed, malicious, arbitrary or highly
reprehensible misconduct that departs to a marked degree from
ordinary standards of decent behaviour. (3) Where they are
awarded, punitive damages should be assessed in an amount
reasonably proportionate to such factors as the harm caused, the
degree of the misconduct, the relative vulnerability of the
plaintiff and any advantage or profit gained by the defendant,
(4) having regard to any other fines or penalties suffered by
the defendant for the misconduct in question. (5) Punitive
damages are generally given only where the misconduct would
otherwise be unpunished or where other penalties are or are
likely to be inadequate to achieve the objectives of
retribution, deterrence and denunciation. (6) Their purpose is
not to compensate the plaintiff, but (7) to give a defendant his
or her just desert (retribution), to deter the defendant and
others from similar misconduct in the future (deterrence), and
to mark the community s collective condemnation (denunciation of
what has happened. (8) Punitive damages are awarded only where
compensatory damages, which to some extent are punitive, are
insufficient to accomplish these objectives, and (9) they are
given in an amount that is no greater than necessary to
rationally accomplish their purpose. (10) The jury should be
told that while normally the state would be the recipient of any
fine or penalty for misconduct, the plaintiff will keep punitive
damages as a windfall in addition to compensatory damages.
(11) Judges and juries in our system have usually found that
moderate awards of punitive damages, which inevitably carry a
stigma in the broader community, are generally sufficient.

[83]
The evidence heard at this trial does not justify an
award of punitive damages. What occurred in this case was
unfortunate, a builder built a home that was defective and
deficient, however, they did nothing that can be categorized as
high-handed, malicious, arbitrary or highly reprehensible
misconduct that departs to a marked degree from ordinary
standards of decent behaviour .

[84]
In some respects, early on in the case, the defendants
attempted to placate the plaintiffs when a determination was
made that there was some difficulties with the house i.e.
providing of an air conditioner at no charge. The breakdown in
communication, the degree of problems and the failure to
acknowledge deficiencies with the home justify damages for
inconvenience and stress, however this case was a far cry from
one which could justify the imposition of punitive damages.

[85]
Therefore the claim for punitive damages is dismissed.

The Plaintiffs Claim for the Costs of Legal Fees and
Expert Reports

[86]
The plaintiffs have put forward a claim in this case for
the costs of expert witnesses and reports. In the Statement of
Claim it is framed as costs for independent consultants to
investigate and qualify defects and deficiencies in design and
construction and to recommend appropriate action . The amount
claimed at trial included legal fees. The total for engineering
and other consultant work was $43,493.37. The total for legal
fees was $77,789.05. The plaintiffs also seek interest charges
on money borrowed to fund the litigation. These amounts would
not include the money expended for the trial of this matter. In
my view, however, when one tries to categorize these expenses,
they are for the most part costs within the traditional legal
meaning of the word.

[87]
I do not particularly have difficulty in accepting that
these sums were spent. The plaintiffs clearly engaged the
services of a number of experts, and had a number of lawyers
acting on their behalf in advancing this claim. The real
question here is whether these claims should be addressed as
special damages or as part of the broader question of
responsibility for the costs of this litigation. The question of
costs is really a matter which will require further argument and
representation by both sides in this dispute following the
release of this decision. I can confidently say that the
defendants have likely matched the plaintiffs in costs incurred
in this case. They have engaged several experts and have filed a
number of reports at various stages throughout this case. It is
to be noted that the Statement of Claim here was issued on
August 16th, 2001, and that the lions share of the
plaintiffs expert reports and legal fees leading up to the
trial were incurred after that date.

[88]
The Courts of Justice Act at section 131(1)
provides:

Costs Subject to the provisions of an Act or rules of court,
the costs of and incidental to a proceeding or a step in a
proceeding are in the discretion of the court, and the court may
determine by whom and to what extent the costs shall be paid.

Rule 57.01(1) provides for a codification of the factors a court
is to consider when determining this issue. This area of the law
has undergone and continues to undergo changes on a seemingly
continuous basis, as is evidenced by the amendments to the rules
governing costs that took effect on July 1, 2005.

[89]
In Orkin s The Law of Costsat pages
204-207, the author discusses and analyzes the issue of
disbursements including the costs of experts and how the courts
have been capable of including the costs of expert witnesses and
their reports both before and during a trial as part of the
overall review and assessment of a parties costs.

To be assessable, disbursements must be reasonably necessary to
advance a party s position, and the amount of a disbursement
must be reasonable. Reasonableness of expenditures for witnesses
is based on what seemed reasonable at the time, i.e. before and
during the trial In a personal injury action, bills for medical
and actuarial assessments directed towards the trial or the
legal dispute between the parties should be dealt with in costs
rather than considered as special damages.

[90]
In the case of this action, the only expenditures
incurred by the plaintiffs which would seem to clearly fall out
of the category of a cost related disbursement were those
incurred prior to the commencement of the action in August of
2001. These were the initial reports obtained by the homeowners
for the very specific purpose of demonstrating or proving the
deficiencies with the house. I have little difficulty in
allowing some of these as special damages. However, the expenses
incurred once the action was commenced are more fairly
adjudicated from the perspective of an examination of the entire
conduct of the parties and the ultimate result of all of this
litigation from the beginning to the end.

[91]
My review of the brief of disbursements filed by the
plaintiffs show the following expenses incurred prior to the
start of this action: Bottriell s initial inspection reports
predating the lawsuit which total $1,170.50, Temviron s
inspection fee respecting the homes H.V.A.C. of $267.50, and the
cost of the first air balancing test in early August of 2001, of
$312.98. The total amount I would allow under this part of the
plaintiffs claim is $1,750.98.

The Impact of the Defendants Buying the Home In August
2004

[92]
On the 21st day of July, 2004, the defendant
builder agreed to buy back the home for $550,000. The
transaction closed on the 11th of August, 2004. This
amount exceeded the sale price by $105,557.03. This event came
three years into the lawsuit and involved no doubt a great deal
of give and take between the parties, but its impact on the
overall matter cannot be taken lightly. In terms of mitigating
the plaintiffs direct loss as a result of the breach of
contract this seemed to be the only effective means of
accomplishing this goal. The prospects of ever repairing the
home seemed doomed fairly early on in this case and short of
completely repairing the house to the plaintiffs satisfaction,
this was the only effective means of mitigating the direct loss
occasioned by the breach of contract.

[93]
The plaintiffs chose to leave behind certain chattels
and fixtures such as appliances and a chandelier. They advanced
the position at trial that the defendants should reimburse them
the price of these items. There is no such obligation in this
case. The defendants did not suggest or encourage the plaintiffs
to leave these items behind. The defendants did not agree to
acquire these items in the Agreement of Purchase and Sale to buy
back the house. The evidence suggests that the plaintiffs were
never precluded from retrieving these items at any time they so
desired. To compel the defendants to purchase these items would
be wrong.

[94]
The plaintiffs have claimed damages against the builder
for improvements made to the subject property. The principal
item under this heading was approximately $25,000 for
landscaping. The house was sold for its market value.
Improvements to a home are factored in when a purchase price is
arrived at as between a buyer and a seller. Had the defendants
simply bought the house back for the price paid by the
plaintiffs, this expenditure could have been viewed as a direct
loss, however, since it was reacquired at market value, the
improvements are subsumed in the purchase price. I do not award
anything to the plaintiffs for this part of their claim.

[95]
The plaintiffs did incur expenditures which can be
directly related to the breach of contract on the part of the
defendant builder, and which are not erased by the buy back in
August, 2004. The costs actually incurred by the plaintiffs to
perform remedial work for defects in the home are recoverable,
because they are a direct consequence of the defendant builder s
breach. The evidence showed that $4,924.42 was spent on repairs
that can be properly categorized as expenses made by the
plaintiffs to remedy deficiencies resulting from the defendants
breach. These included $ 4,270 to repair a leaking roof, and
miscellaneous smaller amounts for minor but justifiable remedial
work. Therefore, I award a further $4,924.42 in this case.

JUDGMENT

[96]
The plaintiffs are therefore granted a judgment in this
case of $21,675.40. Prejudgment interest on this award shall be
in accordance with the Courts of Justice Act.

CONCLUSION

[97]
This was an unfortunate matter. The parties at various
times during this long drawn out affair became entrenched in
what can only be described as questionable positions. It seems
to me, however, that once the builder finally took the
extraordinary step of buying back the house at its market value,
this act should have put into place the required mechanisms to
forever extinguish the fires of this litigation.

COSTS

[98]
Counsel may approach me through the trial coordinator s
office with respect to the issue of costs, particularly in
relationship to the methodology of making representations on
this issue.

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.